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EXHIBIT 5
MONDAY, APRIL 24, 1995
Contact: Steven J. Harris/Rita McKay
(313) 956-3164/(313) 252-8790
CHRYSLER BOARD REJECTS TRACINDA PROPOSAL;
CONFIRMS CASH RESERVE POSITION
AUBURN HILLS, Mich. -- Chrysler Corporation announced today that its
Board of Directors, after a thorough and careful review, has unanimously
rejected the leveraged buy-out proposal announced on April 12 by Tracinda
Corporation, a company owned by Mr. Kirk Kerkorian.
The Board concluded that pursuing the proposal would not be in the best
interests of the Company, its shareholders, employees, dealers, suppliers or
customers and reiterated its support of the management team and its long term
strategic vision for the company.
Also at today's meeting, the Board took the opportunity to confirm
Chrysler's cash reserve policy. Robert J. Eaton, Chairman and Chief Executive
Officer of Chrysler said:
"Chrysler does not accumulate cash needlessly. Our current cash reserve
was set after careful study of what is necessary to remain globally
competitive, especially during the cyclical downturns that affect our business
from time to time.
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"We review our needs and our target periodically in light of changing
business conditions. Our current cash reserve target is $7.5 billion. To the
extent that the Company generates cash in excess of the target, and after
taking into account opportunities for investment in our core businesses and
changes in business conditions, Chrysler plans to use the excess to create
additional shareholder value, through share repurchases or increased
dividends."
Chrysler confirmed that it intends to complete its previously announced $1
billion share repurchase program. To date the Company has purchased $403
million of its stock under this program.
Chrysler's directors noted that speculation and uncertainty about the
Tracinda proposal had led to concerns on the part of credit rating agencies,
lenders, employees, and dealers. To address these concerns and the harm to the
company that could result, Chrysler's directors reaffirmed that the company is
not for sale.
The Board stated that it is Chrysler's policy to be open to communications
with all shareholders, and to consider shareholder suggestions carefully.
However, the Board believes unsolicited publicly announced proposals such as
Tracinda's are disruptive and do not serve the best interests of our
shareholders.
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"The primary objective of the directors and management of Chrysler is to
build value for shareholders. The Board is convinced that the company's
current policies and strategies will achieve that goal," Mr. Eaton said.
The complete text of the letter outlining the Board's position, sent today
to Mr. Kerkorian by Mr. Eaton, follows:
Dear Mr. Kerkorian:
Chrysler's Board of Directors and our entire senior management team
are committed to achieving increased profitability for Chrysler and
increased value for Chrysler shareholders. We regularly consider how
best to achieve these goals. In this context, the Board of Directors has
reviewed your April 12 letter. The Board has unanimously determined to
reject the proposal outlined in your letter.
Now and always, Chrysler is focused on the long-term. We are
committed to a sound business strategy that will allow Chrysler to
continue to produce innovative, quality products throughout the business
cycle. And that means ensuring the financial strength that will enable
Chrysler to fulfill that commitment. Today, Chrysler is more financially
stable than it has ever been and once more stands proudly among the top
automakers in the U.S. and in the world, producing exceptional products
and profitability.
In the directors' judgment, pursuing your proposal is not in the best
interests of the Company, its shareholders, its employees, its dealers or
its customers. Here are several of the reasons that underlie this
conclusion:
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Your letter speaks of an "offer," but it only amounts to an
invitation to Chrysler to join you in a search to see if financing might be
available for a transaction. When you add up what would be required to pay
shareholders and to refinance debt facilities, more than $30 billion
would be needed. Not a single non-Chrysler dollar of that financing --
according to Tracinda's announcements -- has been lined up. We have
grave doubts that such a financing is feasible.
Your letter contains no information whatsoever as to where you would
look for the needed funds. Your representatives have publicly stated that
you would use $5.5 billion of Chrysler's cash reserves, seek $12-13
billion of debt financing, and seek $3 billion in equity. Beyond these
amounts, we believe your proposal would most likely also require
refinancing approximately $10 billion of bank facilities at Chrysler and
at Chrysler Financial.
Even if this immense financing could be accomplished, the result
would be a crippled company:
--Given the cyclicality of the automotive business, we think it would
be rash to strip Chrysler of over 70% of its cash reserves, and leave it
vulnerable to the next downturn in the business cycle.
--Chrysler's financial strength is also essential to developing new
products and maintaining a leadership position in the intensely competitive
world automotive marketplace. Our planned product spending alone over
the next five years is $23 billion. Without the new products from the
investment, Chrysler simply couldn't compete.
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To explore an LBO this big would be a long and deeply disruptive
process. Tracinda has acknowledged that close to eight months would be
needed. The risks of failing to complete a transaction, and of major harm
to the Company in the process, are very high.
Since Tracinda announced its letter, Chrysler's relations with lenders
have suffered. In additon, credit rating agencies have placed Chrysler's
debt on credit watch with negative implications. Key partners in
Chrysler's ongoing success -- our employees, our dealers, our suppliers --
have also voiced their alarm and concern about the prospects of a
leveraged transaction.
Our directors believe it would be a serious mistake to subject
Chrysler to the kind of leveraged transaction your proposal contemplates.
Your representatives have said that you are willing to bet your stake in
Chrysler on such a transaction. Our directors do not have any interest in
gambling with Chrysler's future.
We believe strongly in Chrysler's future. We also believe that the
benefits from that bright future should be and will be realized by all of
Chrysler's shareholders.
Yours sincerely,
Robert J. Eaton
Chairman and Chief Executive Officer
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